NCB - At a crossroads?

NCB - At a crossroads?

The share price of logistics provider and port operator NCB Holdings Bhd has been dropping to new and newer 52 week-low lately (compared from its 52 week-high of RM4.90 done on Aug 5, 2013). At the time of posting on March 21, NCB closed at RM3.25.

Long term and short term shareholders, especially the minorities must now be feeling they are at a crossroads time. Why? Should they hang on to their investment or dispose of it while they can or hope for the best that NCB will have a fast turnaround recovery?

No thanks to NCB which recently released a rather "poor" set of  results for its Financial Year 2013 - making just an eps of 11.4 sen. This poor set of results is due to a pre-tax loss of RM72.8 million (for Financial Year 2013)  suffered by one of its division, Kontena Nasional. Kontena Nasional also made a RM19.2 million loss for Financial Year 2012 according to claims in May last year.

The Malaysian Anti-Corruption Commission said it would begin investigations into the matter. The Edge reported that when it contacted NCB for updates on the financial clean-up, NCB declined to comment.

Now whether there will be more element of surprises from Kontena Nasional  which may result in more losses for NCB is still a naggling thought in the minds of investors.

The loss suffered by Kontena Nasional is severely dragging down the profitable profits of NCB's other divisions  Compare it to its previous many years and one will know find it hard to believe it.

Those previous years' good results were accompanied by a string of interim, special and final dividends announcements that were exceptionally high. But for Financial Year 2013, no news of a final or special dividends were announced (NCB normally announce it together with the 4th Quarterly results). So far, a meagre interim dividend of only RM35 was paid on Oct 10, 2013.  Chances of a final or even a special dividend are virtually gone (in my opinion).

On the plus side, NCB's new wharf, which came on-stream in December last year could be the much-needed boost. The new Wharf 8A, which is part of Northport's Container Terminal 4, will bring Northport's total annual throughput capacity to 5.6 million twenty-foot equivalent units, up to 600,000 TEUs.

But NCB still has a strong competitor in Westport Holdings Bhd. However, a market observer says that for NCB to compete with Westports, it has to establish that it can be just as efficient.

Several research house have given different target price for NCB. Maybank Investment Bank research has a "buy" call on the stock with a target price of RM4.84 while RHB Research has placed a "neutral" call at RM3.50.

Which research house would you trust?

High Dividends during the last few years

A check on the website of www.malaysiastock.biz revealed that from Financial Year 2006 to 2012, NCB has always paid out an Interim and Final Dividend including Special Dividend. And these dividends were quiet a big amounts for the shareholders. From 2006 to 2012, the dividends were RM265 (2006), RM250 (2007), RM250 (2008), RM280 (2009), RM370 (2010), RM760 (2011) and RM655 (2012).

Going forward, unless the uncertainty of Kontena Nasional is totally removed, one can only hope that NCB will see a strong recovery in Financial Year 2014.

NCB's parent company, Permodalan Nasional Bhd (PNB) has a controlling stake of 47.71% in the company through Skim Amanah Saham Bumiputera. The other major shareholders are MISC Bhd (15.73%) and Retirement Fund Inc (9.135).

Kassim is also a shareholder of NCB. I bought  NCB at RM3.15 on Feb 19, 2010. Having seen my "paper profit" evaporating from NCB's spiralling down trend price, I am perhaps "comforted" by the massive amount dividends I have received totalling RM3,710.00 since my purchase date.

The perils of not locking in profits

The downtrend price (back to my original buying price) also bring to mind the perils of not taking profits especially profits that exceeded 30%. As  an investor, making an investment to buy a counter is not that difficult. Once a counter has been bought (say at RM2), as long as the share price of that counter stays plus minus at the RM2 levels , we are unlikely to be affected at all. In fact, if it stays at that tight range, we are likely not to even check on the share price at all. (What for as there won't be any wide movement of the share price thence we are just wasting our time to check on it).

However should the counter's share price starts to move north gradually and higher and higher and of course sometimes retreats a bit, but somehow remains higher and stays at that level, chances are we would feel excited about this "new increase of wealth although still in paper profit". Checking on its share price now and then would be a looking forward activity for each time the share moves up a bit would bring the smiles out.

After all, the main purpose of investing is always to see our investment appreciate over the times and also to protect our profits especially reasonable profits of over 30%.

But sometimes, we are always reminded by the teaching ideas by so many "stock and investment gurus" about the benefit of long-term investment. So much so that many times, when we are in a position to lock in our huge gains, we refuse to do so and when it starts to retreat, we still cling on to our investment believing that it is only a mild correction or profit taking and will rebounce back to its original high again.

Why I did not lock in profits this time from my investment in NCB? I had every opportunity and time in the world to do so. From April to Aug 21, 2013, the NCB's share price was always above RM4.50. It touched a high of RM4.90 on Aug 7. How could I allow NCB to retreat back all the gains and worse, at a price that is above my original buying price? I am a seasoned investor since 1993 yet I could not protect my winning investment in NCB this time. (This goes to show that we are forever learning something everytime). In this case, I learned the bitter lesson of not taking profit when the opportunity was still there.

At the moment, I am still at the crossroads. Should I sell my investment in NCB off before it gets worse or hope for a speedy recovery? You see, not doing anything right now is also considered as making a decision to hold on to my investment in NCB.

Perhaps a more telling time would be when NCB announces its 1st Quarter Results on April or May this year. Should there be a normalised results (assuming very minimum loss or no loss from Kontena Nasional), I have to believe that NCB would regain some grounds and be trading at a higher price. But it the losses of Kontena Nasional continues and affect the overall result of NCB, then I won't be surprised if NCB plunges below the RM3 levels.

"Kudos" to McDonalds Malaysia

On March 15, 2014, McDonalds Malaysia carried out a half-page colour advertisement in The Star. In the advertisement, McDonalds extended their sincere hope and prayer for the safety and well-being of the passengers and cabin crew of Malaysia Airlines Flight MH370.

In light of the current developments surrounding Flight MH370, McDonalds announced the postponement of National Breakfast Day 2014 which was scheduled to take place on March 17, 2014.

At times like this when the whole nation is coming together as one, I am extremely pleased that McDonalds has displayed great social responsibility as a corporate company to postpone the National Breakfast Day to a more suitable time.

Thank you McDonalds for sharing the deep feelings of the whole nation for MH370. Together we must continue to pray hard for the passengers and cabin crew of Malaysia Airlines Flight MH370.

Fast and Furious

Fast and Furious

Mention the word "Fast and Furious" and most moviegoers will know that it is all about the action movie that is actually a very popular movie, so much so that the movie has  sequel after sequel. In fact, the Fast and Furious movie No. 7 is actually slated for release in 2015 only. Originally slated for release in 2014 but was postponed due to the untimely death of one of its main actor, Paul Walker in a car accident on Nov 2013. Rupert Friend is believed to be his replacement.

The first movie was released in 2001 with the title The Fast and the Furious. However not all the subsequent sequels were the same title.  Nevertheless, all the "Fast and Furious" movies were packed with actions and car racings driven at very fast and super speed.

In Bursa Malaysia, we also have our own versions of "Fast and Furious" actions for some companies, especially when they release their quarterly results that were either above market expectation or below market expectation.

Not up to investors' expectations

To know how fast and furious investors will react, just check on consumer stock Zhulian Corporation Berhad engaging in multi-level marketing (MLM). Zhulian's share price peaked at RM5.15 on Nov 20, 2013. But on Jan 22, 2014, Zhulian released a quarterly result that saw a more than 50% drop of net profit compared to its many steady previous quarters, coupled with the ongoing unrest in Thailand (Zhulian has distributions's business in Thailand), investors wasted no time to dispose off their shares the very next day and the many more subsequent days to come.

It was quite common to see Zhulian hogging in the top losers category for many days. So much so that Zhulian's share price touched a low of RM2.75 on Feb 20. (Hey, that is a 46.6% off from the RM5.15 peak price!)

At the time  of writing, the unrest in Thailand is getting more and more serious. Definitely, business operation in Thailand must be affected. However how serious the complications will be felt only when Zhulian releases its 1st Quarterly results on April 2014. Zhulian closed at RM2.97 on Mar 4.

Another stock that witnessed the fast and furious reaction from its investors is Pos Malaysia Bhd. On Feb 20, after the market closed, it released its 3rd Quarterly results that was not up to investors' expectation.

Guess what? Pos hogged the No. 1 top losers' list when its shares dropped by a whopping 67 sen loss or a  plunge of 12.7% to close at RM4.62. That was not all yet. The next day its shares dropped a further 12 sen to close at RM4.50. Pos' share price peaked at RM6.05 on Nov 29, 2013. (That is a 25.6% off from that peak price or a loss of RM1.55).

Pos did not make any loss. It just made a net profit of RM22.83 million (for the third quarter ended Dec 31, 2013) compared to RM51.6 million in the same period previously. Several research house were quick enough to downgrade the stock immediately. Since then at the time of writing, shares of Pos has closed at RM4.64 on Mar 4.

Sterling Results

What if a company announces an exceptional good quarter results? Take for example Fima Corporation Bhd, the rich son of its rich mother, Kumpulan Fima Bhd. Fimacor was featured in my blog on Jan 20, 2014 titled : One rich generous printing and plantation son.

Fimacor announced a sterling set of 3rd Quarter results that earned an earning per share of 29.98 sen, thus bringing its total cumulative 9 months to 71.11 sen.

Surprisingly, it was the Production and trading of security and confidential documents' segment that saw revenue  improved by 17.9% to RM183.6 million from RM155.7 million last year, mainly due to higher sales volume of certain documents. In tandem with higher revenue, profit before tax increased by 24.5% or RM10.7 million compared to corresponding period of previous year.

Again very surprisingly, the oil palm production and processing segment didn't produce the results which was expected. Revenue from this segment was RM8.7 million or 12.3% lower than corresponding period last year. A pre-tax profit of RM21.2 million was registered, a shortfall of RM913,000 or 4.1% compared to previous year. The drop in profit was mainly due to lower revenue of palm oil products.

Going forward, I expect the oil palm production to do better as crude palm oil has been trading at a high of RM2,600 during the last few months.

After the results was announced, Fimacor's share price shot up by a massive 53 sen or 8.3% to close at RM6.95 on Feb 21. It was the number two top gainer.  The next trading day on Feb 24, the fast and furious buying spree of investors did not abate. The share shot up a further 41 sen or 5.9% to close at RM7.36. It was the number one top gainer. On Feb 25, the share surged again further to close at RM7.70, up 34 sen or 4.62%. Again it was the day's number one top gainer.

At the time of writing of Mar 4, Fimacor closed at RM7.55.

Should Fimacor announces another sterling 4th Quarterly results on May, its eps might cross the RM1 mark (assuming an eps of 30 sen), its shareholders are going to be rewarded for at least a final dividend of RM235 (interim RM150) bringing its total dividend to RM385. But personally, my hunch tells me that a final dividend of RM250 or RM300 looks a strong possibility.

As I have been a Fimacor shareholders since the last nearly ten years and most likely for many more years to come, its rising dividends payout is always a very good reason to keep and hold on the shares for as long as possible. Of course provided that the fundamentals business of Fimacor remain unchange, i.e. printing and palm oil in the future.

OS asked which other counters

which I feel have growth potential.

He commented that most counters has gone up.

First, it is very difficult to know which stocks display growth potential. Unless one reads a lot and does a lot of research, one would be left in the dark. Even if we come across a report of a certain stock that is poised for a re-rating due to some potential big contract or jobs, chances are the share price would have move up a few notches. By then, would you still jump in to invest knowing that the share price has move up already?

Take for examples the current water crisis in Selangor. We all know that most stocks connected to the water crisis should have potential for room to grow, but do we buy the stocks? Another example is the current hot spell. Any stocks involved in the mineral water business should benefit from this hot spell. Do we buy the stocks?

Therefore, it is my personal belief that it is easier to spot on stocks that have boring but quite predictable consistent earning. Sadly these type of stocks do not appear attractive to many investors who do not have the patience to wait for the "durian runtuh" season one day.  But I love these type of stocks especially when these type of stocks also pay reasonable regular dividends.

Secondly, not most counters (stocks) have gone up. Stocks' share price will only go up and stay at a certain level only when they are supported by their good and consistent quarterly results. Without the good and consistent quarterly results, you can bet that the share price will be low. That is why we see plenty of penny stocks and meagre few sen stocks.

Correction: Bernas did pay out a 12% Taxable First Interim Dividend for the year 2012 on Jan 29, 2013. In earlier blog : The Dilemma of Over Supply of Rice, I mentioned that Bernas has not pay any dividend in 2013. My apology for not checking out the details thoroughly.